Selling the extraordinary

“Everything has become more experiential”

– Dante D’Angelo, brand and consumer development director at Valentino

It is an odd state of affairs indeed for the retail sector at the moment. On the one hand, consumers are flocking to digital devices like never before, particularly for their shopping. Conversely, this means that the physical experience of shopping becomes rarer, creating more opportunities for specialism. An article in the Financial Times a few weeks ago read as if a commercial plague had swept through the UK high street over the past few years. With 4,000 stores affected, 2012 was, according to data from the Centre for Retail Research, the “worst year since the start of the credit crisis in 2008”. Names of erstwhile stalwarts like Woolworth’s, Jessop’s, Peacocks and Clinton Cards have all fallen under the knife. As we wrote at the beginning of last month, what little salvation there is lies in embracing digital technologies.

The luxury sector however has its own special, gilt-edged cards to play. In St. Tropez, the Christian Dior boutique’s ample courtyard has recently been made use of with an all-day restaurant. Louis Vuitton have a cinema screening classic Italian films in their Rome boutique. It’s no wonder such brands have also branched into the hospitality sector, the former working with the St. Regis to develop branded rooms, the latter into full-scale hotel management. Ferragamo have been involved in the hotel sector for years. Two recent examples show how companies can extend the experience for visitors, and help drive revenue at the same time.

The auction house Sotheby’s will tomorrow auction a rather large collection of surrealist art. One of the few things that definitively puts it ahead of Christie’s is that it has its own cafe, which, last week and this week, is pushing the surrealism theme into its catering (see above menu). It’s a simple, creative idea that creates a cohesive brand, celebrates a big event, and ultimately hopes to drive revenue from peripheral streams around the auction. The RA’s current Manet exhibition is taking a leaf from this tactic, opening later but charging double the usual rates for a special experience, including a drink and a guide. The other interesting news of note was a new tactic being employed by the fashion company Valentino. Not content merely with having a major exhibition at London’s Somerset House, the label is also tinkering in an innovative way with its event structure. As detailed last week in Bloomberg Businessweek, Valentino is opening a new boutique in New York later this year, during which the typical glitterati will be in attendance. However, the new idea comes in the form of the company inviting prized customers to the opening for the chance to rub shoulders with said VIPs, for a steep price. Similarly, Gucci is offering its non-VIP customers tours of its Florence workshops for the first time.

Something that Zeitgeist has been noticing for a couple of years now, recently echoed by Boston Consulting Group (BCG) senior partner Jean-Marc Bellaiche, is the importance, particularly for those in their 20s – like Zeitgeist – that people place in defining themselves by what they’ve done rather than what they own: “In an era of over-consumption, people are realizing that there is more than just buying products… Buying experiences provides more pleasure and satisfaction”. On a macro level there is significant bifurcation in the retail market; not everyone will be able to afford in creating extraordinary experiences for their customers. A recent BCG report helps illustrate this, noting that while the apparel sector as a whole saw shareholder returns fall by 1.3% for the period 2007-2011, the top ten players produced a weighted average annual total shareholder return of 19%. Expect then for retailers – those that can – to increasingly provide exclusive experiences to their customers, beyond the celebrity, whether it be early product releases, tours, or events. Just don’t expect it to come without a pricetag.

Turning two negatives into something positive

We all know that catching cancer early can improve our chances of survival. For some charities, such as Coppafeel, the primary aim is to encourage people to know their body and get checked out as soon as they suspect there may be something wrong. Yet our inherent behaviour means we often put off seeing our doctor.

The reasons for stalling are varied, from wanting to ignore reality, a dislike of doctors and hospitals to simply putting it off until tomorrow.

One of the barriers is that you can’t get to see a doctor immediately. You have to book an appointment and then organise your life around it.

All of which makes the Get to Know Cancer pop-up clinic initiative in the Centrale Shopping Centre in Croydon such a great idea. Shoppers can pop in and ask questions to specialists and nurses from the Royal Marsden and Cancer Research UK (for whom Zeitgeist recently did a half marathon – sponsorships still kindly accepted).

Why we like it

It’s obvious to anyone strolling through a UK town that the economic downturn has lead to a depressing number of empty properties along the high street.

The most recent high profile closure was JJB Sports who went into administration last week with the loss of thousands of jobs. The retailer followed a number of famous names, including Clinton Cards, Blacks, Peacocks and Game to either disappear or be sold off to new owners.

For some, the traditional high street is beyond salvation.

In his new book, Sold Out, the former Iceland and Focus DIY CEO  Bill Grimsey, writes that the high street is “as good as dead already“.

He believes that repeated failures by government, online shopping and the recession have created a perfect storm and lambasted the review of sector by the retail expert Mary Portas as “all a waste of money and resources”.

As for cancer, the consequences of this terrible disease are known to us all, lives taken and lives destroyed.

Saving lives and money

Recognising our natural inertia and the need to get illnesses diagnosed as soon as possible the shop interrupts people and overcomes many barriers. And like all great ideas, it’s simple. Now that it exists, it’s strange to think that it has taken so long for such an idea to be implemented.

Aside from the human cost, cancer costs the state around £11bn a year. So quite apart from the emotional benefit of saving lives, the clinic could save us all money.

Bill Grimsey might be right. The traditional high street may well be gone forever. If it has, our challenge is to find new ways to use the empty spaces left by defunct retailers.

Let’s hope that the Croydon trial is a success and the start of the renaissance.

White sky in the morning, profits warning!

How will the snow affect the UK retail landscape?

While the news at the time focused on stranded air passengers, a crippled transport network and the need for some inventive parenting to explain why Father Christmas was unable to deliver presents on time, the after-effects of December’s heavy snowfall are now being felt strongly on the UK high streets and shopping centres.

With the tinsel and fairy lights still in full view, it has been a far from Happy New Year for the number of retailers forced to announce that their sales were lower than expected with the consquences ranging from store closures and job losses to profits warnings. Many cited the unwelcome cold snap as compounding difficulties brought about by the economic crisis, changing consumer habits and threats appearing from non-traditional competitors.

First to register concern were HMV, who admitted in an unscheduled trading statement, that like-for-like sales across its UK and Ireland outlets had plunged by 13.6% in December. Having seen other music and entertainment retailers, including Zavvi, Our Price, Tower Records and even Woolworths bite the dust in recent years it isn’t surprising that the entertainment specialist is feeling the heat while the rest of us freeze.

Zeitgeist has already touched on how ‘In some industries, the concept of owning something tangibly has become redundant;‘, with music and film sitting high on that list. More worryingly for HMV as the owner of Waterstones bookshops is Amazon‘s online dominance of the category and the rise of devices like the Kindle and regular smartphones that are likely to eat into book sales in the coming years.

Deeper Problems

While the sub-zero temperatures may have kept shoppers out of their stores the weather can’t take all of the blame. This weekend, this half of Zeitgeist bought a CD as a friends birthday present. A quick look online showed the item retailing on HMV.com at £8.99, however in-store I was obliged to pay £17.99. The Sales Assistant helpfully told me that the difference was because online sales are shipped from Guernsey. I rather suspect that the lower price has more to do with the fact that other online stores such as Amazon.co.uk and Play.com are also selling the item for £8.99 than where the item is shipped from.

It’s not hard to see why the bricks-and-mortar stores are in so much trouble when they have to sell items for nearly double the online price to cover their overheads. In this instance the extra cost doubles as a ‘Failure to Plan‘ tax for me, but increasingly shoppers will go online for their entertainment needs rather than paying a premium for the convenience of getting it immediately on the high street. Alternatively they’ll simply download or stream it and do away with the need for any physical material purchase.

This final option shows how behaviour change can be brought about with the right motivations. For years now, we have been encouraged to reduce unnecessary waste and raw materials to help the environment. However, it is the convenience of having music, film, games and books stored digitally, rather on discs in plastic boxes or paper, that has proved more of a driver than any desire to save the planet.

Others Affected

Another retailer to be affected by how we now spend our leisure time is Games Workshop who issued a profits warning of their own soon after.

Two other retailers who also issued a now on-trend profits warning are greeting cards merchants Clinton Cards and maternity and babyware retailer Mothercare.

For Clintons this is the second such warning in six months and time will tell whether ‘strategic intiatives‘ taken by the board will have the desired effect or whether as a nation, a new generation is growing up to wish ‘Happy Birthdays’ and ‘Merry Chistmases’ via text message or social media sites.

Encroachment on their traditional market by the major multiples hasn’t helped Mothercare and brokers Seymour Pierce have questioned quite how much of their problems are down to the snow.

With the Christmas period so crucial for many retailers there may be more similar statements being prepared in boardrooms up and down the land. The slightly milder weather in early January may help ‘The Sales’ boost some bottom lines, but with a number of retailers choosing to delay exposing shoppers to the increase in VAT the bargain hunters may not spend enough to make up the shortfall, particularly if they are saving for a more expensive 2011. If a handful of retailers do go under it begs the question, ‘Who will take over their retail space and what will the retail landscape look like in a couple of years from now?’.

Such gloomy announcements from household names will do little to help the economy and improve consumer confidence, particularly once the seemingly permanent VAT rise comes into effect everywhere.

In the meantime we’ll have to wait and see what legacy the snow is going to leave in other sectors such as insurance, utilities and travel. Either way, it might be an idea to start saving now for those premiums and gas bills.